SoundHound AI (NASDAQ:SOUN) stock has been firmly in the grip of shifting market sentiment, with shares falling 52% over the past six months as worries about a potential AI bubble have weighed heavily on the name.
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It’s not just external market forces at play, however. The company is operating in the red, and its GAAP net loss in Q3 2025 totaled $109.3 million, a sharp increase from the $21.8 million loss it reported in Q3 2024.
That’s not the full story, and SoundHound bulls point out that the company is also enjoying a dramatic increase in quarterly revenues and clientele. SoundHound’s Q3 revenue of $42 million was a year-over-year improvement of 68%, and the company also raised its full-year guidance (once again) to a range of $165 to $180 million.
Moreover, on its most recent earnings call, company management spoke of its continuing success inking deals with numerous leaders in a variety of industries, including the automotive sector, financial services, and restaurants, among others.
So, with the stock sliding, the obvious question is whether this drop opens the door for investors to jump in. Bearish investor Stephen Ayers isn’t buying it, saying the progress so far doesn’t justify a change in view.
“SoundHound AI remains a Sell due to overvaluation, persistent unprofitability, and heavy reliance on M&A-driven growth,” explains the investor.
Ayers elaborates on these dealbreakers, emphasizing that much of the company’s growth has been M&A in nature. He cites three deals from the past year, including a $60 million purchase of Interactions in September.
Another fear of Ayers’ is the difficulty in scaling up, especially in its key market of drive-ins, which he believes is “gated by physical hardware retrofits.” In other words, individual franchisees will need to buy-in to this vision to make it a success.
“SoundHound’s tech is not something that can be easily implemented into existing systems,” adds Ayers.
And then there’s the validation conundrum. The investor calculates that SOUN is priced at a premium that assumes 45% CAGR and 20% free cash flow margins. That’s a big leap considering the company has yet to generate profits, notes Ayers.
There’s one last elephant in the room: the potential for the tech giants to swoop in and steal the company’s thunder. This is especially worrisome considering that one of SoundHound’s key patents is set to expire before the end of the decade.
“It’s hard for me to believe SoundHound can outpace the big boys in the long run and grow into its valuation,” concludes Ayers.
Wall Street, however, is taking a far more optimistic stance. The stock carries a Strong Buy consensus based on 5 Buy ratings and one Hold, and the average 12-month price target of $16.60 suggests potential upside of 116% from current levels. (See SOUN stock forecast)
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.